Bonds weakened today, even if only slightly.  It was enough to bring 10yr yields right up to the closest and arguably most significant overhead technical level at 2.07%.  If we consider that ceiling to be a small zone between 2.06 and 2.07, it came into play multiple times today including an after hours run just after the 3pm CME close.

All of the above adds up to a bond market that's staging for a potential breakout.  The most obvious conclusion is that tomorrow's Powell testimony is the yay/nay vote on the bond market breakout.  But it's so obvious that we can easily assume anyone else with the capacity to trade bonds is well aware of it.  Thus, the near-term landscape is already part of current trading levels.

Bottom line: there's no telling what sort of Powell comments are priced in to today's trading levels.  There's certainly some expectation for him to be a bit less rate-friendly than Fed Funds Futures would suggest.  The safest bet is to expect volatility--especially in light of the 10yr auction and Fed Minutes in the afternoon.  If 10yr yields break above 2.07%, it wouldn't be a surprise to see very quick follow-through up to the 2.10-2.12 area.  The saving grace is that MBS would likely outperform in that scenario.